What is an Enrage timer?
An enrage timer is a mechanism in place to force you to kill a boss within a certain amount of time. Generally, it indicates that you need to exceed the minimum level of dps (damage per second) during the boss encounter.
Failure to kill the boss before the enrage timer expires causes the boss to do drastically increased damage. This means that it will very quickly destroy the player(s) if not killed within the next few seconds.
You can still kill a boss after the enrage timer starts, but you almost always have a matter of seconds to do it, rather than minutes.
Generally, there are no bonuses for killing a boss during an enrage timer (although it is possible that this is different in Diablo 3, it seems unlikely; the enrage timer is not intended as a challenge), aside from knowing that you barely squeaked by the encounter.
An enrage timer is a set amount of time given to kill a boss. In World of Warcraft, when an enrage timer was over, the boss would virtually one hit everyone to death and it was nearly impossible to kill after the timer went off. The whole idea was to make it so you had to be geared so much to defeat a boss, else it'll enrage and wipe you.
Post 1.0.4
There has been just a few changes from post 1.0.4.
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Champion and Rare monsters will no longer enrage after prolonged combat, and they will no longer heal to full health after not being engaged.
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Rakanoth is now properly immune to crowd control effects when enraged in Inferno difficulty
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Brickhouse monsters (e.g. Demonic Tremors) should now Arm Shields and enrage less often, and will no longer gain an increase in damage while enraged.
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All enrages are now Inferno only.
Pre 1.0.4
In Diablo 3, it buffs the boss to become even stronger. In patch 1.0.3, Blizzard chose to buff a few bosses in the Inferno difficulty. There is a ton of complaining about it. I could find LOTS of references of people complaining in official forums. Here are some of the bosses that now have enrage and what happens after the enrage timer is up:
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Butcher - 3 minute timer Inferno Only. He will set fire to all the chambers if it is beyond 3 minutes.
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Zoltun Kulle - 3 minute timer on Inferno only. When the timer is up, he will teleport more often to the player more frequently, and now deals more damage when teleporting to the player. Also will call 'Ceiling Collapse' more often
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Belial - 3 minute timer on Inferno only, starting the final stage of the fight. When the timer is up, he will drop more green pools across the entire platform making it very difficult for melee chars to beat him. There has been a LOT of complains about this.
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Siegebreaker - 4 minute timer, Inferno Only. The Siegebreaker will do his claw/slash attack more often and for more damage after the enrage timer.
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Rakanoth - 3 minute enrage timer (this isn't official consider an enrage for whatever reason), Inferno Only . After three minutes he will become a lot more aggressive.
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Cydaea - 4 minute enrage timer, Inferno Only. Will spawn more spiderlings more frequently.
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Ghom - 4 minute enrage timer, Inferno Only. Will spawn Gas Clouds more frequently. Heres a video
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Elite mobs also have an 'enrage' timer in which they will heal back to full health slowly. Typically minions will start blinking which is most notable after you die. They also do a DTT spell after the enrage timer, causing damage over time to make the battle a little more difficult
There are no bonuses for killing any mobs or bosses during enrage. The point was to make the game more difficult instead of making it a perk like Valor.
An enrage timer is a set amount of time you have to kill a boss.
Usually after that time expires, the boss becomes very strong and will start killing people with one hit. Or it may trigger an ability that will kill everyone in the area.
As far as bonuses, it's too early to tell.
It is worth noting that this question has already been answered previously.
An enrage timer is a set time limit after which your enemy will gain additional abilities, with the intent of ensuring the fight does not continue much longer.
Since patch 1.0.4 Elite packs no longer enrage, and all boss enrage timers only take effect on inferno difficulty.
Boss Enrage Timers
Boss enrage timers appear to be specific for Inferno difficulty only
The Butcher - will set fire to all of the platforms in his chamber simultaneously if you fail to kill him within three minutes.
Ghom - will begin spawning 'Gas Clouds' more frequently after four minutes.
Zoltun Kulle - will enrage, using his 'Ceiling Collapse' ability more frequently, and for more damage after three minutes.
Belial - Enrages after three minutes in phase 3, increasing the number of green pools spawned, which will be spawned across the entire platform.
Cydaea - will enrage after four minutes, causing spiderlings to spawn more frequently.
Rakanoth - will become more aggressive after three minutes.